Act 66 of 2013 and Takings....

Previously, on June 13, I reported on House Bill 1414.  http://brbechtel.blogspot.com/2013/06/house-bill-1414.html   This bill defined the guaranteed minimum royalty and added a provision allowing the horizontal drilling and hydrofracturing of contiguous properties that were held under lease, unless the lease provided they could not be pooled. 

This bill has since become law, Act 66 of 2013, when the bill was passed by the House and sent to the Senate on June 29, 2013 and the amended bill was passed by the Senate on June 30, 2013.  Incidentally, these were a Saturday and Sunday, respectively.  Governor Tom Corbett signed the Act on July 9, 2013.

Article 1, Section 17 of the Pennsylvania Constitution provides that "No ex post facto law, nor any law impairing the obligation of contracts, or making irrevocable any grant of special privileges or immunities, shall be passed."  In fact, Act 66 has just such an effect.   One Section (2.1) of Act 66 provides that "Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontally drilling unless expressly prohibited by a lease."  Thus, if a producer has the right to oil and gas across multiple leases, the producer may horizontally drill under all the leases unless the lease specifically provides the producer may not.  The Producer may gain other rights to produce by implication such as pipelines, compressors, dehydration stations and water use. 

The problem is that there is no reference that this is prospective, and this was not the law in the past.  So old 1930 leases can now, under color of Commonwealth law, be horizontally drilled across boundaries, even if the owners intended to keep those rights.  Worse yet, applying the Belden and Blake principles, the landowner would be responsible for challenging the actions of the Producers.  Of course, the Producing companies have the power, not a single landowner.  So there is little chance that Mom and Pop will be able to stop or collect their due on an old lease.  If this section were limited to prospective leases, landowners would have the ability to contract as they see fit.  If this section were not passed at all, such provisions would be up to the intent of the parties.

Article 1, Section 1 provides for certain "inherent and indefeasible rights, among which are those of enjoying life and liberty, of acquiring, possessing and protecting property..."  The Fifth Amendment to the United States Constitution provides that no one shall be deprived of life, liberty or property without due process of law.

In this instance, there is a law which has an unrelated provision attached on a Saturday, approved and passed on a Sunday and signed in short order over a holiday week.  That law, in fact, affects the possession and protection of property and impairs the rights of citizens in the contracts they have already executed.  Such a law is not only likely unconstitutional, but could give rise to a cause of action under the Eminent Domain Code 26 Pa.C.S.A. Section 101, et. seq.   This violates the section of the Code taking people's property for private use.  26 Pa.C.S.A. Section 204.  Lest we think there is some benefit other than a private benefit, the words of the Governor should make it clear.  The Tribune Review reported:

"In a letter to lawmakers, Corbett said he believes the new law enhances the efficiency of drilling for oil and gas while limiting environmental damage and protecting the rights of landowners and leaseholders."

Read more: http://triblive.com/state/pennsylvania/4340341-74/gas-drilling-corbett#ixzz2ZK4l51l6.

 

To be fair, gas producers cannot even be sure what the law means.  It contains no provision sexplaining to what extent contiguous properties may be "pooled".  For instance, can all of Western Pennsylvania be "pooled"?  Must one of the leases allow pooling before ALL of them can be pooled?  Must they all have been taken by the same company, or may one company buy up (or be assigned) the leases in order to meet the provisions of being owned contiguously?  This would seemingly be allowed.  What if all the leases were originally to one owner, but were now farmed out to others?  This would seemingly be disallowed. 

 

It should be clear to readers that attorneys will have a field day with this law and that landowers will be big losers.  I urge anyone with interest to contact their legislators and push a repeal before we all become embroiled in a mess from which there is no return.  Recognizing there may be differences of opinion, I at least urge you to contact your legislator and be part of the decision making process.  Let's not fix this on a Saturday and Sunday at the end of a fiscal year, but in open public forums debating the process.

Private Nuisance.....

            Chicken houses, coal mines, natural gas operations, bars, strip clubs and any number of other potentially bothersome uses of property can interfere with a private landowner’s enjoyment of their home.  These uses are legal, and in some cases extremely necessary and useful.  Most are regulated in some way and those regulations often go a long way toward protecting neighbors from any ill effects.  However, sometimes neighbors end up pitted against each other because of uses of property which fall through the cracks or are otherwise not regulated.  At common law, there was an action for a private nuisance.  Although not employed a lot (and perhaps with good reason), this action is one which should be considered in appropriate circumstances. 

            In Waschak v. Moffat 379 Pa. 441, 109 A.2d 310, 1954, the Supreme Court adopted the Restatement of the Law of Torts Section 822 as the rule in Pennsylvania:

            The actor is liable in an action for damages for a non-trespassory invasion of another's interest in the private use and enjoyment of land if,

                        (a) the other has property rights and privileges in respect to the use                               and enjoyment interfered with; and

                        (b) the invasion is substantial; and

                        (c) the actor’s conduct is a legal cause of the invasion; and                                                 (d) the invasion is either

                                    (i) intentional and unreasonable or

                                    (ii)unintentional and otherwise actionable under the rules                                                    governing liability for negligent, reckless or ultrahazardous                                         conduct.

Restatement of the Law of Torts, §822.

            The key factor in Washcak was the determination of reasonableness.  The plaintiffs were the owners of a home located next to a coal yard processing facility.  Gaseous by products of the coal processing had discolored the homeowner’s property.  The Court ruled that the owner of the coal yard was not liable for the damage, relying on the fact that the homeowners acquired their residence subsequent to the coal yard operation being active.  The Court also cited that fact that the gas that produced the discoloration, hydrogen sulfide, was not a normal byproduct of coal processing and, in fact, only occurred at the processing area next to the homeowners’ property. 

            In Hughes v. Emerald Mines Corporation 303 Pa. Super. 426, 426 A.2d 1 (1982), the Superior Court cited the Supreme Court's adoption of the Restatement of Torts, 2d at § 822, in Washcak.  Hughes involved an alleged devaluation of real property value due to a loss of water allegedly caused by an airshaft.  The law cited in that case is exceptionally instructive and will be recited at length. 

            First, the Superior Court recited the Restatement 2d as:

One is subject to liability for a private nuisance if, but only if, his conduct is a legal cause of an invasion of another's interest in the private use and enjoyment of land, and the invasion is either:

                        (a) intentional and unreasonable, or

                        (b) unintentional and otherwise actionable under the rules controlling                              liability for negligent or reckless conduct, or for abnormally dangerous                                    conditions or activities.

Restatement of the Law of Torts 2d, §822.

            The Hughes case was tried on the first of the two theories, that being that the airshaft was intentional and unreasonable.  The Restatement defines intentional invasion as follows:

An invasion of another's interest in the use and enjoyment of land or an interference with the public right is intentional if the actor

                         (a) acts for the purpose of causing it, or

                         (b) knows that it is resulting or is substantially certain to result from his                                     conduct.

Restatement of the Law of Torts 2d, §825.

            An intentional invasion becomes unreasonable if:

                        (a) the gravity of the harm outweighs the utility of the actors conduct, or

                        (b) the harm caused by the conduct is serious and the financial burden of compensating                               for this and similar harms to others would not make the continuation of the conduct                                 not feasible.

Restatement of the Law of Torts 2d, §826.

            Section 829 (a) contributes to the definition of unreasonableness:

An intentional invasion of another's interest in the use and enjoyment of land is unreasonable if the harm resulting from the invasion is severe and greater than the other should be required to bear without compensation.

Restatement of the Law of Torts 2d, §829(a). 

            The comments following Section 829(a) supply further explanation as follows:

…certain types of harm may be so severe as to require a holding of unreasonableness as a matter of law, regardless of the utility of the conduct.  This is particularly true if the harm resulting from the invasion is physical in character…  Aside from the normal requirement that the harm be significant …,   it is apparent that the more serious the harm is found to be, the more likely it is that the trier of fact will hold that the invasion is unreasonable. 

            In Hughes, a coal mining company had pumped grout down their air shafts resulting in two of a homeowner’s wells being rendered unusable.  The coal company was liable  for private nuisance.  The court relied upon the sections of the Restatement of Torts, 2d, as cited above, noting the defendant provided no proof that its air shafts could not have been located on other parts of the defendant's property.  The Superior Court specifically rejected the idea that the airshafts had a utility and were necessary, and therefore could not be unreasonable.  Unreasonableness being a term of art, utility must be balanced against the bad effects of an act to determine reasonableness.  It should be noted that, although the coal company was found liable, the jury award of $32,500.00 was reduced because the actual cost of remedying the wells was more in the range of $1,000.00 to $2,000.00.  The case was remanded to determine a reasonable award.  The lesson is a defendant might pay less in remedying the situation than paying an attorney and a plaintiff might be better off accepting the remedy than fighting a jury trial.

            The Superior Court continued to adopt by citation further portions of the Restatement of Torts, 2d in Kembel v. Schlegel 329 Pa. Super. 159, 478 A.2d. 11 (1984).  More specifically, the court adopted Section 821 F's definition of significant harm: 

There is liability for a nuisance only to those to whom it causes a significant harm, of a kind that would be suffered by a normal person in the community or by property in normal condition and used for a normal purpose.

Restatement of the Law of Torts 2d, §821 F.  The Superior Court favorably referred to the Comment to Section 821 F, that states that significant harm is harm of importance involving more than slight inconvenience or petty annoyance:  there must be a real and appreciable interference with use or enjoyment of land.  Furthermore, the Superior Court adopted the reasonable person standard. 

            In Kembel, a group of neighbors sought in injunction barring the Schlegel from operating his transportation company during certain times and days of the week (nights and weekends).  The Superior Court found no evidence in the record produced by the neighbors that the trucking company’s actions rose to the level of significant harm.  Significantly, the Superior Court allowed that liability for private nuisance may arise even if the results of a defendant's actions are not injurious to heath.  (Citing Smith v. Alderson 262 Pa.Super. 387, 389, 396 A.2d 808, 810 (1979)).

            The lasting lessons are that landowner’s have a chance to use the theory of nuisance to remedy harm, but must show that the harm is serious.  In addition, landowner’s must be reasonable in their expectations of recovery.  Private nuisance is not a tool to punish a neighbor, it is only a tool to seek redress for wrongs.  For philosophical purposes, private nuisance can benefit everyone and place external costs of pollution, or other nuisances back on the person causing the harm.  Where such costs belong.   

House Bill 1414....

A new bill is wending its way through the Commonwealth.  This bill, sponsored by Representative Everett, (R - Lycoming) is, for the most part, even handed.  It simply defines the minimum royalty provisions and Commonwealth law and allows various options.  This bill passed the House June 11, 2013 and is now in the Senate.  It has been referred to the Environmental Resources and Energy Committee, chaired by Senator Yaw (R - Bradford, Lycoming, Sullivan and parts of Susquehanna and Union Counties).  In my opinion only, these are good legislators who are attempting to look out for their constituents. 

There is one section, however, that is troubling.  Most likely, this section was enacted for a good purpose.  However, the unintended effects could be a problem for landowners.  This section provides that "Where an operator has the right to develop multiple contiguous leases separately, the operator may develop those leases jointly by horizontally drilling unless expressly prohibited by a lease."  Thus, if a producer has the right to oil and gas across multiple leases, the producer may horizontally drill under all the leases unless the lease specifically provides the producer may not.  The Producer may gain other rights to produce by implication such as pipelines, compressors, dehydration stations and water use. 

The problem is that there is no reference that this is prospective, and this was not the law in the past.  So old 1930 leases can now, under color of Commonwealth law, be horizontally drilled across boundaries, even if the owners intended to keep those rights.  Worse yet, applying the Belden and Blake principles, the landowner would be responsible for challenging the actions of the Producers.  Of course, the Producing companies have the power, not a single landowner.  So there is little chance that Mom and Pop will be able to stop or collect their due on an old lease. 

If this section were limited to prospective leases, landowners would have the ability to contract as they see fit.  If this section were not passed at all, such provisions would be up to the intent of the parties.  Since 2008, who could seriously argue that a lease did not intend horizontal drilling?  However, prior to horizontal drilling and hydrofracturing in the 1940's, extended to horizontal hydrofracturing of shale in Pennsylvania in 1995, how can anyone seriously think such rights were included in a lease?

The question here is an age old one.  If a right of way is granted for a cartpath, the fact that someone now wants to drive a car is not an impermissible expansion of the right of way.  It is, instead, a natural consequence, similar in nature.  This is often expressed as the growing up of an elephant.  If someone allows an elephant on their property, they cannot be heard to complain when the elephant grows up. 

However, in this instance, the argument is that the nature of modern horizontal hydrofracturing of shale, accompanied by its huge requirements of using water, its larger infrastructure, the more permanent nature of the infrastructure, the dehydration facilities and compressors, are all of a different character and quality than oil and gas operations in 1930. 

This may, or may not turn out to be the law.  However, the Senate Bill essentially changes the status quo.  Ultimately, this may turn out to be good policy.  Again, in the future.  But there are at the very least, issues that have not been determined.  If you have any opinion on this bill, I urge you to contact your legislator and tell them what you think. 

Don't just vote....COMPLAIN!

I have been reading the usual spate of "if you don't vote, don't complain" Schtick. May I remind everyone of taxation without representation and inalienable rights. It is your duty to complain - vote or not. And I believe refusing to choose one of two republicrats bought and sold by the same people, or even refusing to pick a third party and be coopted and marginalized, is not a viable statement in and of itself. By the way, I vote and I welcome EVERYONE to complain about injustice. It is the American Way.

Allow me to elaborate. Our political system is a conundrum. If one believes only those who vote have the right to complain, how do we as a society explain allowing corporations to have access to representatives those corporations have no right to vote for or against to talk about laws those corporations have no right to vote for or against? And if we base that access on paying taxes, how do we stop people who pay taxes, but choose not to vote, from having access? And how do we continue to allow access to corporations and businesses that pay no tax but ship their profits offshore? And how do the 300 million votes (if there were that many and they even voted) compete with the millions of dollars that can buy influence AFTER the election and BEFORE the next election cycle? Finally, how do we justify the very existence of professional firms whose sole job is to hire themselves out as influencers? Their status does not depend on voting, taxes, or even their own money. It is apparent citizens cannot vote away this power and citizens cannot vote to acquire this power, no matter how many people there are voting.

Vote early. And vote often. But make no mistake, your vote is worth no more and no less than pushing a button in an opinion poll that is time stamped as of the second the polls close. Do not depend upon a vote in a system that has self y family, as well as others, have adopted children and advanced the discussion on how to do so in a loving caring manner to both adoptive families, as well as birth parents. I know a family that has purchased and uses an electric mower which, in our area, is probably powered by cleaner natural gas or wind than coal. My wife drives a hybrid vehicle. All of these are the power of consumers that the market recognizes and reacts to in positive ways. Right now, I am very interested in plastic bags. I refuse to take them and try to use my own reusable bags. And Target now offers .05 cent per bag if you bring your own. Starbucks gives a ten cent discount for reusable cups. All of these things are changes I want to see and I dare say they have darn little to do with government and much more with ideas passed among people (like our church) and executed individually in the marketplace. While I vote and think there is a place for such voting, I also think it important people (voting or not) abdicate their visions and desires. Our families need all the help we can get.

One further point is that the power of a vote is so diluted so as to be laughable. If I wanted real power, I would purchase shares of Haliburton and vote for the corporate governance of Haliburton. My vote would be less diluted, I would have far more power, and I would never actually “vote” as part of the political system. It is time our political system is separated from our economic system.

In all these instances, I am suggesting the power of the citizen consumer. A person who associates with others like themselves (or different, but with a common interest or interests) and who takes actions to make their interests become real. Every suffragette did not think exactly alike. But women got the right to vote. Every African American did not have the same reasons for wanting civil rights. Some wanted education, some good jobs, and some political freedom. Some all three. But they banded together and used the power of strikes, boycotts, selective purchasing and plain old fashioned public opinion to get what they wanted. They did not accomplish everything they wanted by voting.

It is time we as consumers reevaluate our purchasing. We do not need to be driven by advertisers. We do not need to be controlled by status or what we think we need. We can control the discussion of what we want. Talk with your neighbors. Unfortunately in some ways this means Facebook them. But join together in ways that transcend the old ties of unions and political parties. I guarantee that the corporations and political action committees have already done this. Take control of your own destiny. Turn down a plastic bag. Plant a garden. Feed someone who is hungry. Pick up garbage. Mke it a party and have some fun. We owe it to ourselves and our children.

Title Washing....

       The following is an unfinished article on this subject.  However, I feel it is an important enough topic to write about.  I would like to give credit for invaluable research, editing and both part of this written material, as well as the continuing research and work which will cause this material to change in the future to Audrey Broucek, Attorney at Law.  Without her invaluable work, this posting would not be possible.  

      There is a theory regarding titles in the Commonwealth that is unique. It is the theory of wash sales. This theory essentially holds that the tax sale of unseated land carries with it all interest in that land which is not separately assessed. To begin to understand this theory, we have to leave behind our preconceptions and modern prejudices. We need to think back to the days when agrarianism was rampant. We need to remember that small groups of people, many of them motivated by leaving what had been an oppressive Europe, were coming to the Americas. In fact, we know that William Penn was trying to set up a colony to give refuge to religious refugees, especially Quakers. Land, like all natural resources were considered to come from God held by the divine right of kings. Such "ownership" was subject to dispossession by another king, as when the Normans conquered Britain, or was subject to grant by the king, such as when the Magna Charta granted certain subjects accommodations in return for fealty. 

        So property rights came into being by possession recognized by laws. In addition, as echoed by the modern theory of adverse possession, persons could obtain property against all but the king through the force of their own labor. By fencing, farming and working the land, a possessor could exclude others from the land. However, implicit in both instances was some form of making the land productive; either directly by your own labor, or indirectly by the labor of your subjects. The law recognized these property rights by written instruments. These could be indentures, polls or, as was the case with William Penn, a Charter. Penn's Charter from King Charles II was granted on March 4, 1681. On October 28, 1701, during Penn's last visit, he granted the Charter of Privileges. In this, Penn allowed certain privileges of ownership and descent. It should be noted, however, that Penn did not mention a right to own property. http://www.amphilsoc.org/exhibits/treasures/charter.htm. This was a time of utopian ideas. Thomas Moore's book Utopia was published in 1516. Many viewed an agricultural society on which free men held property for which they could work in an agricultural unit to support their family as an ideal. 

        Consequently, Penn looked to persons to colonize and develop Pennsylvania. However, Pennsylvania was a wild place. The last lands were not purchased from the Native Americans until 1784. Lands were offered by the Proprietors faster than people could move into them and risk life and limb to settle them. The pace of privatization increased with corruption, speculation and the need of a new Commonwealth to pay off debts from the Revolutionary War. However, the ideal that people would possess their land and tame the wilderness never disappeared. Laws were passed to stop speculation. They failed. But the law still afforded the person who cultivated and tamed land one important protection. When tamed, the land became "seated" and the law would no longer allow the land to be sold for taxes without the person who occupied the land being notified. This was because the person occupying seated land was personally liable for the taxes. For the remaining land - the "unseated" land - the law was more concerned with the policies of stemming speculation and moving in colonists to pay taxes and make the land productive. The land itself was what was actually taxed “in rem”. This distinction of seated and unseated land can be found in 72 P.S. §5511.21.  

         When seen from this viewpoint, land that was not returned occupied and was not taxed was not yet fully owned and was subject to reapportionment by an in rem sale for taxes. The seated versus unseated distinction was a reflection of the argument between Alexander Hamilton and Thomas Jefferson about how to deal with the new federal lands west of the original 13 colonies. Hamilton wanted to sell, privatize and pay off debt. Jefferson wanted to keep land in an agrarian vision for those who would settle, cultivate and make land productive. In the area of the property law and tax sales, at least, Jefferson's vision was winning in Pennsylvania at the time. Unseated lands were sold under authority of the Act of March 13, 1815 and seated lands were sold under authority of the Act of April 29, 1844. Pennsylvania Tax Sales and Title and the Evidence of the Same, John F. Whitworth, 1900, reprinted by MOML, p. 52.

Through the various Acts on unseated lands, it was made the duty of the holder of lands to give to the commissioners a description of the unseated lands held by him. Williston v. Colkett, 9 Pa. 38. Previous to the Act of March 13, 1815, to vest a title in the purchaser of lands sold for taxes, an exact and literal compliance with every direction of the law or laws was necessary. Morton v. Harris, 9 Watts 319, 1840 WL 3760 (Pa.) Due to these onerous requisites, few owners of unseated lands would pay taxes on them. Id. at 4. According to Chief Justice Huston, “If a purchaser at a tax sale improved on the land, and by his labor made it valuable, some friendly neighbor or prowling speculator sought out the owner, and the purchaser was dispossessed.” Id.

To provide a remedy, the legislature determined to remove all difficulties known to stand in the way of those who purchased unseated lands sold for taxes. The Act of March 13, 1815, 6 Sm.L. 301, § 4, 72 P.S. § 6091, is an attempt to enact that a purchaser at a tax sale of a tract shall have a good title in two years from the sale. The intention was to change the evidence; to substitute the presumption that everything was rightly done, for proof that it was rightly done. Morton v. Harris, 9 Watts 319, 1840 WL 3760 (Pa.) The Act dispenses with proof of any other pre-requisite to a sale for taxes, except that the land was unseated, a tax charged, regularly or irregularly, that it was due and unpaid for one year and the land sold and not redeemed within two years. Stewart v. Shoenfelt, 13 Serg. & Rawle (Pa. 1825), Morton v. Harris, 9 Watts 319, 1840 WL 3760 (Pa.). The Acts related to unseated lands were followed and affirmed by case law which upheld the legislature’s intent. For example, the Supreme Court held that unseated land could be sold in the name of the owner, the reputed owner, the warrantee, or anyone connected with the title. Strauch v. Shoemaker, 1841 WL 4062 (Pa.), 1 Watts & Serg. 166 (Pa. 1841). The issue was whether the tax collector and the public would be apprised of what land was being sold. "...no tax sale of land is valid unless both the assessment and the conveyance by the treasurer contain sufficient descriptions to identify and disclose the property taxed and sold." Miller v. Leopold, ___ Pa.Cmwlth ___, 353 A.2d 65, 69 (1976), citing Fisk v. Corey, 141 Pa. 334, 21 A. 594 (1891). "What is necessary is not a description by metes and bounds, but an identification of the land sufficient to enable the tax collector and the public to determine what property is being assessed or sold." Miller v. Leopold, ___ Pa.Cmwlth. ___, 353 A.2d 65, 69 (1976), citing Hunter v. McKlveen, 361 Pa. 479, 64 A.2d 366 (1949) Assuming that the identification of the property was sufficient to enable the public to determine the property being sold, any irregularities in the assessment, or process or otherwise would not affect the title of the purchaser who would hold the estate irredeemable and absolute. Stewart v. Shoenfelt, 13 Serg. & Rawle (Pa. 1825).

The Supreme Court went even further in Strauch v. Shoemaker, and decided that unseated lands, sufficiently identified in the assessment, may be sold for the non-payment of taxes and the whole title to the land passed notwithstanding the fact that it was not assessed in the name of the owner. Auman v. Hough, 31 Pa.Super. 337, 1906 WL 569 (Pa.Super.) The Court reiterated its declaration in Fager v. Campbell, (5 Watts 288) stating, “ the land itself, and not the owner of it, is debtor for the public charge; and it is therefore immaterial, at the moment of sale, what may be the state of the ownership, or how many derivative interests may have been carved out of it. With these the public has no concern.”  
       In Roaring Creek Water Co. v. Northumberland Co. Com’rs, the Court of Common Pleas noted this very issue, stating, “All these tracts have been valued and assessed in the usual way as unseated lands, and, doubtless, a treasurer’s sale will pass the whole title, both as to the surface and all that I beneath it. I refer to this matter only to suggest, both to the county and the owners, that hereafter it might be well to value and assess the respective interests of the several owners separately. One man may have a distinct title to the surface and another to that which is beneath. I do not, however, decide that it is incumbent on the taxing officers to notice the title of parties…” Roaring Creek Water Co. v. Northumbderland Co. Com’rs., 1 Northumb.L.J. 181, 6 Pa.C.C. 473 (Pa.Com.Pl.) Thirteen years later, the Supreme Court affirmed this opinion Any record of a deed creating a separate estate in the minerals would not be notice to the assessor or the commissioners, as they were not bound to search or examine the records. Hutchinson v. Kline, 199 Pa. 564, 49 A. 312 (1901) In Hutchinson v. Kline, the Court reaffirmed this position that a tax sale of unseated land, even when the mineral estate had been severed, would be valid as to the whole unless the owner of the severed estate had returned the severed estate to the tax collector for taxation, as required by the act of 28^th March, 1806. 199 Pa. 564, 49 A. 312 (1901), 
         Following this reasoning, the Federal Courts have embodied the theory of wash sales in the case of Proctor v. Sagamore Big Game Club, 166 F.Supp. 465 (W.D. PA. 1958) aff’d 265 F.2d 196 (3d Cir. 1959). In fact, the District Court quoted from the treatise, Tax Sales and Titles by John Whitworth as follows: ‘There is nothing in reason or law to prevent a man who holds a defective title from purchasing a better at a treasurer’s sale for taxes. (Coxe v. Gibson, 27 Pa. 160) Again, it was held that where one purchases lands at tax sales, and he has any doubt as to the sufficiency of the title, he can perfect it by purchase of the land at a subsequent tax sale. (Reinboth v. Zerbe Run Improvement Co., 29 Pa. 139.) It was said of these cases that the land being unseated, there was no personal obligation on the owner for the payment of taxes. (Powell v. Lantzy, 173 Pa. 543; Cobb v. Barclay, 9 Pa.Super. 573) It is held in another case that the owner of unseated land may purchase the land at treasurer’s sale the same as may be done by an entire stranger to the title; and the reason given is that the owner is not personally responsible for the payment of taxes. (Neill v. Lacy, 110 Pa. 294 (1 A. 325). Proctor, 166 F.Supp. 465, at 479.
     It was not until the abolishment of the seated/unseated distinction by the Real Estate Tax Sale Law, Act of July 7, 1947, P.L. 1368, No. 542, as amended, 72 P.S. §§5860.101-5860.803, that the modem view of assessment and notice slowly began to arrive. Now, of course, tax sales are seen as tantamount to a taking and must be strictly construed. Mullane v. Central Hanover Bank and Trust, 339 U.S. 306 (1950), Mennonite Board of Missions v. Adams, 462 U.S. 791 (1983). Notice provisions are much stricter. First Pennsylvania Bank v. Lancaster County Tax Claim Bureau, 504 Pa. 179 (1983). In addition, there has been a rethinking of the theory of wash sales. It is well established in Pennsylvania jurisprudence that there may be different estates and separate ownership of title in the same tract of land. SeeF. H. Rockwell & Co. v. Warren County, 1910, 228 Pa. 430, 77 A. 665; Wilson v. A. Cook Sons Co., 298 Pa. 85, 90 In Scranton v. Sanderson, the Supreme Court of Pennsylvania held that a sale or assignment of the coal in place, would relieve the owner of the surface from responsibility for the taxes levied thereon. 105 Pa. 469 (1884) This case and others have concluded that a severed mineral estate is a separate estate and may be assessed and taxed separately from the surface rights. See Logan v. Washington County, 29 Pa. 373. Only the estate properly assessed and taxed could pass at a tax sale. See also Rockwell & Co. v. Warren County, 228 Pa. 430, 433. In Armstrong v. Black Fox Mining and Development Corp., the Court of Common Pleas of Pennsylvania went further, stating that, “a tax sale for delinquent taxes conveys only that estate owned by the titleholder and covered by the assessment.” 15 Pa. D. & C. 3d 757, 763, referencing: Miller v. McCullough, 104 Pa. 624 (1884); Brundred v. Egbert, 164 Pa. 615, 30 Atl. 503 (1894).
The question of whether the mineral estate was separately assessed does not resolve the question of title. Day v. Johnson, involved an action to quiet title to the mineral estate which had previously been excepted and reserved. In this instance, John A. Day, executed a conveyance of land on April 23, 1923 but excepted and reserved the oil, gas, and minerals therefrom. Neither John A. Day, nor his sole successor to the premises had operated or produced the premises for oil, gas, or minerals. Here, the Court of Common Pleas stated that, “the interest created by the exception and reservation was never assessed for taxation purposes and if not so assessed there obviously could be no sale thereof for delinquent taxes. The sole purpose of sale of delinquent taxes is to collect the taxes for the operation of the county and not to deprive the owner of his property. In our opinion, the mere creation of an exception and reservation without the operation for the removal of the minerals does not create a taxable estate per se and would not until production is had therefrom and properly assessed in value.” 31 Pa. D. & C.3d 556, 559-560. The right to tax depends upon the valuation and assessment of a definite estate in land. Because there may be a reservation of oil or gas by the grantor of the surface, or there may be an expressed grant of all the oil or gas underlying one or several tracts of land, it does not follow that in point of fact there is any such estate in existence. A mere naked reservation of oil and gas in a deed without any other facts to base a valuation upon is not sufficient to warrant the assessment of taxes. Development in the neighborhood, sales of oil or gas lands in close enough proximity to add value, or any other element of value which may form a basis of valuation may be taken into consideration by the assessor or other taxing authorities, but it should always be borne in mind that real estate is the thing being dealt with, and that oil and gas are considered real estate, and, if there be no oil and gas, then there be no real estate. See F. H. Rockwell & Co. v. Warren County, 1910, 228 Pa. 430, 433; Day v. Johnson, 31 Pa. D. & C.3d 556, 559-560.   
  Furthermore, if there was no known value in the gas (or other mineral to be excepted) in the warrant at issue until very recently, as may be the case for the Marcellus gas, a lack of assessment of such an estate should not cost the sub-surface owner his title to the minerals. An owner does not lose title by virtue of failure to have his gas assessed. Any failure to have property assessed might be the subject of contention between the taxing authorities and the owner but does not assist a stranger to the title claiming ownership. New York St. Nat. Gas Corp. v. Swan-Finch Gas Dev. Corp., 173 F. Supp, 184, 193. A purchaser at a tax sale of the surface estate would not be able to rely on this to claim he purchased the mineral estate as well. Armstrong v. Black Fox Mining and Development Corp., 15 Pa. D. & C. 3d 757, 761 referencing New York St. Nat. Gas Corp. v. Swan-Finch Gas Dev. Corp., 173 F.Supp 184 (W. D. Pa 1959), aff’d 278 F.2d 577 (3d. Cir. 1960) Finally, in Day v. Johnson, supra, the court recognized that the taxing authorities have historically taxed only oil and gas actually removed from the sub-surface. The reason for this, the court stated, is a logical one in that no separate entity comes into being until the oil and gas is brought to the surface and a valuation placed upon it in terms of market value.
A recent case from Centre County, Herder Spring Hunting Club v. Harry Keller and Anna Keller, et al, No. 2008-3434 (CCP Centre) discussed the washing title issue following this line of reasoning. Judge Lunsford denied a summary judgment motion with regard to a wash title. The facts were that the Keller’s acquired a tract of unseated land known as the Eleanor Siddons Warrant in 1894. They then sold the surface rights to Isaac Beck, Isaiah Beck and James Fisher on June 20, 1899, reserving “…coal, stone, fire clay, iron ore and other minerals of whatever kind, oil and natural gas…” The Becks sold the property to Arthur Baird in February of 1910. Mr. Baird sold the property to Robert Jackson and Thomas Lititz in August of 1910. In 1922 Ralph Smith acquired the property from Jackson and Lititz. In November of 1935, the Centre County Commissioner acquired title to the property vie Treasurers Sale. The property was offered for sale by the Treasurer for unpaid real estate taxes. No bidder bid the upset price and the Commissioners purchase the property. At the time the land was unseated. By deed dated June 3, 1941, the Centre County Commissioner sold the property to Max Herr. Max Herr dies intestate on February 2, 1944. After a title search, the Plaintiff discovered the reservation. Because of the Marcellus shale underneath the property, it became important whether the tax sale extinguished the reservation. The Plaintiff argued that the Defendants failed to protect their subsurface interests. Specifically, the Plaintiff argued that the failure of Defendants to give notice of the severance to the County Commissioners[sic] so that it could be taxed pursuant to the Act of March 8, 1906 meant that there was no separate assessment and therefore the assessment was on the whole and was sold to Max Herr. The Defendants argued that only subsurface rights under operation and production have value which is assessable and taxable and that only assessed property can be acquired by a tax sale. The court went through an analysis that began with the 1910 case of F.H. Rockwell & Co. v. Warren County, 229 Pa. 430, 77 A.655, 666 (1910). It was stated in Rockwell, that “[a] mere naked reservation of oil and gas in a deed without any other facts to base a valuation upon is not sufficient to warrant the assessment of taxes.” Id., at 433. Jumping forward 93 years, the court cited a common please decision, Day v. Johnson, 31 Pa.D&C.3d 556, 1983 WL 968 (Pa.Com.Pl., 2003, for the finding in favor of a plaintiff who claimed subsurface rights through a deed reservation over defendants who claimed through a tax sale on the basis that the subsurface interest had not been assessed and could not be sold for taxes. The Day court found the creation of an exception and reservation without the operation for the removal of the minerals does not create a taxable estate. Significantly, Judge Lunsford noted there appeared to be no evidence of an oil and gas assessment ever being reported in Centre County. This is significant because it is clear that in some Counties oil and gas were assessed, despite the F.H. Rockwell case. The next case to deal with this issue was the Independent Oil & Gas Association v. Board of Assessment of Fayette County, 572 Pa. 240, 814 A.2d 180 (2002), (IOGA). Although IOGA does speak to oil and gas not being assessable and taxable, the following case of Coolspring Stone Supply, Inc. v. County of Fayette, 593 Pa. 338, 929 A.2d 1150 (2007) made it clear that such a rule was prospective only. Thus, any such assessments, or lack thereof, that occurred in the past would not be disturbed. Judge Lunsford’s reasoning disturbs this clarity of past tradition, usage and case law.  
When viewed from a modern standpoint this Centre County case makes some sense. However, it is totally at odds with the law prior to 1948. Generations lived and bought and sold land under a legal system which included wash titles. The theory was taught in schools and has been the subject of Law Review articles. Thomas E. Boettger, Tax Sales: A Threat to Unguarded Oil, Gas, and Mineral Rights, 67 Dick. L. Rev. 413 (12962-1963). It was accepted tacitly by he Pennsylvania Supreme Court Hutchinson v. Kline, 199 Pa. 564, 49 A. 312 (1901), and explicitly referenced by the federal courts Proctor v. Sagamore Big Game Club, 166 F.Supp. 465 (W.D. PA. 1958) aff’d 265 F.2d 196 (3d Cir. 1959). To overturn such washed titles now would be to unhinge and ignore hundreds of years of land laws and land titles in Pennsylvania. It would force owners of the last tax sale deed to look back to owners of earlier tax sales. It would fly in the face of the Acts affirming prior tax sales. More importantly, it would also promote bad stewardship by awarding title to those who had done the least to protect it.

A little collective bargaining power...

Yesterday I posted Don't Drive Day. Today I saw this. Let's all give it a try, eh? Exercise some collective buying power and who knows where we'll go...

Residential Leases and Landlord Tenant Law...

For those who are not able, or who choose not to, purchase a home, it is very likely they will rent or lease a residential property of some type. Indeed, if you are in an area for only a short time, it maybe better to rent or lease, as is generally the case with college students.

The first thing we need to do is to define a lease. A conveyance of lands or tenements to a person for life, for a term of years, or at will, in consideration of a return of rent or some other recompense. The person who so conveys such lands or tenements is termed the “lessor,” and the person to whom they are conveyed, the “lessee;” and when the lessor so conveys lands or tenements to a lessee, he is said to lease, demise, or let them. Black's Law Dictionary Online, 2d Edition. A residential lease would be for a residence. In layman's terms, it is a contract where one persons agrees to pay rent to another for the opportunity to live in a house, apartment, mobile home or some other place to live. The contract may also require security deposits in case there is damage, it may allow use of common areas such as yards or parking spaces, and it may include some utilities such as heat, electric or cable. All in all, a lease as a contract can be a varied as the parties can imagine.

However, there are many common features. First, of course, is a grant of a property for a period of time. Usually this is a year, but it could be a month or even a week. In some cases, it may be nine months. Second, there is a rent. This is usually paid monthly, but can be paid weekly. Rarely, a rental is paid annually or semi-annually. Third, there are provisions for who pays utilities. Again, these can be split any number of ways. Next, there is likely to be some provisions for what is called “quiet enjoyment”. This essentially means the landlord will leave you alone. Most of the time there is a right to inspect at reasonable times, but in general the leased property is yours to use. Because of this, it is

very common to charge one month's rent and a security deposit equal to one month's rent up front. If a tenant refuses to pay, or causes damage, the security can be withheld by the landlord. Next, there are always provisions for termination or default. Some are very complicated and include formulas in case of condemnation and damage by fire or flood. Some are very simple and just say the lease can be terminated with mutual consent. Most contain some form of acceleration provision that if a tenant fails to pay rent, all the rent for the whole term of the lease becomes due. So if there is a lease for $100.00 per month for one year and the tenant fails to pay, the acceleration clause comes into play and the tenant will owe $1,200.00 all at once.

This is all general, and leases in the Commonwealth are governed by the Landlord Tenant Law of 1951, 68 P.S. Sections 250.101-250.602, as amended. One could easily say this Act actually is about how the Landlord can collect his rent. Section 250.103 discusses provisions excluded from the Act, and virtually all of those provide preference for rent in case of execution (subsection 1, 2, 3), providing for the preference of rent in insolvency, assignments for the benefits of creditors and bankruptcy (subsection 4); providing for the preference of rent in the case of estates (subsection 5). Tenants are given some relief in that they may recover real estate taxes from the landlord if they are required to pay them to keep from losing their leasehold (subsection 6). However, the remaining subsections relate to fixing the rights of landlords with regard to stopping waste, dealing with ejectments, special proceedings for sales between landlords and tenants and fixing fees for proceedings in landlord tenant disputes.

The crux of the matter, is that little protection is provided the tenant.

Leases for not than more than three years may be oral or written. 68 P.S. 250.201. Tenants of such short leases therefore have no written document they can rely upon and are at the mercy of the testimony of the landlord or their agents. The fact any lease more than three years must be in writing is scant protection, given the fact most residential leases are year to year. Although Section 250.204 indicates a tenant may mortgage their lease, this is practically impossible in the case of a residential lease. Just as importantly, it would simply turn the tenant into a debtor. The benefit of such a provision is in the case of a mobile home or other configuration which allows for a tenant's association. In these instances, a longer term lease, more in line with the term of the purchase of a mobile home for instance, could be financed. Section 250.205, in fact, protects tenants which form tenant's organizations or associations.

Another benefit extended to tenants is the ability to escrow rent whenever a building is certified as uninhabitable by an agency or department. 68 P.S. Section 250.206. This is, of course, in accordance with the act of January 24, 1966 (1965 P.L. 1534, No. 536), referred to as the City Rent Withholding Act. The tenant in this case can receive interest and a monthly statement of the escrowed funds. This is actually a codification of the common law wherein a tenant could withhold rent. The difference being under the common law, a tenant risked proceedings for the rent almost immediately.

However, Article III, starting with Section 250.301 sets out the special rules for recovery of rent by assumpsit and distress. These rules are virtually all in the landlord's favor. A landlord or his agent may give written notice that personal property not eempted may be seized in execution and sold. 68 P.S. Section 250.301, 250.302. The class of persons who can avail themselves of these remedies is expansive. See, 68 P.S. Sections 250.303 and 250.304. If the tenant tries to remove property after being served with a notice that their personal property is to be sold, a landlord has the right to seize the property whereever it can be found within 30 days. 68 P.S. Section 250.305.

A tenant does have the right to determine set off, but that again is simply a common law principle. 68 P.S. Section 250.307. After such a proceeding, the landlord can still proceed if the net amount determined is due the landlord. The only recourse is that if the personal property brings more than the rent, the landlord must account to the tenant for the excess. Interestingly, if a landlord is aggrieved by a tenant removing property, the landlord may recover triple damages. 68 P.S. Section 250.311. However, if a landlord wrongfully distrains property when no rent is due, the tenant may recover double damages. 68 P.S. Section 250.313.

Tenant's are entitled to exemptions. There is first a $300.00 exemption for virtually any proeprty. 68 P.S. Section 250.401. There is then an exemption for wearing apparel, Bibles and school books, all sewing machines and other tools of trade, and all uniforms, arms, ammunition and accoutrements of any commissioned officer or enlisted personnel of the National Guard or armed forces. 68 P.S. Section 250.402. There is a laundry list of exemptions for property leased to others or in which others have a security interest such as pianos, melodians and organs; soda water apparatus; sewing machines and typewriters; electric motors; ice cream cabinets; household furniture and goods; shoe repair machinery and tools; beauty and barbershop furniture and equipment; vending machines; restaurant and bar furniture and equipment; meat market and grocery store equipment; and industrial mining and construction machinery and equipment not attached to the realty. 68 P.S. Section 250.403. Finally, there are exemptions for property not actually owned by the tenant, but which may be in their possession, such as items held by the tenant for someone else in the course of trade or as a consignee. 68 P.S. Section 250.404.

Article V describes the procedure for recovery of possession. Mobile Homes have their own special law, the act of November 24, 1976 (P.L. 1176, No. 261), 68 P.S. 398.1, et seq., known as the “Mobile Home Park Rights Act” and is not within the purview of this blog. Essentially, if the tenant fails to remove from the premises at the end of the term, upon a breach, or if the tenant fails to pay rent, a landlord may take action to evict the tenant. 68 P.S. Section 250.501. The landlord must first give 15 days notice. 68 P.S. 250.501(b). (Special mobile home rules apply that a landlord may not evict a tenant even at the end of a term if the tenant continues to meet all rules of the park and pay rent.)

A landlord may bring an action in assumpsit with a district justice for the tenant to appear and answer the complaint. 68 P.S. Section 250.202. At the hearing, if proven, the district justice may order delivery of the real property to the landlord; damages for unjust retention of the premises; and any rent due and unpaid. 68 P.S. Section 250.503. After five days, the justice of the peace may order the sheriff to deliver the property to the landlord. Id., subsection (b). The tenant may, at any time prior to actual eviction, pay the rent and costs and reinstate his lease. Id., subsection (c).

Abandoned Mobile Homes have their own rules pursuant to 68 P.S. Section 250.505.

One area of eternal concern in residential leases is that of the security deposit. No landlord may require more than two months' rent as security. 68 P.S. Section 250.511a. If funds are held more than two years, there should be interest. 68 P.S. Section 250.511b. It is possible to bond, rather than escrow. 68 P.S. Section 250.511c. Most importantly, if a landlord can be shown to improperly hold escrow funds more than thirty days after termination of a lease, e tenant may recover double the amount of the escrow. The burden of proof is on the landlord. Id., Subsection (c).

Unfortunately, if a tenant if aggreived by a decision, they must come up with the full amount of the judgment before they can appeal. 68 P.S. Section 250.513. This is, of course, extremely difficult for a tenant who has not been making rent in the first place.

A very important provision of the law concerns use of illegal drugs. A tenant can be removed from a single family dwelling, apartment, multiple dwelling premises or tenement building in three instances. First, if there is a conviction for an illegal sale, manufacture or distribution of a drug in violation of “The Controlled Substances Act” 35 P.S. Sections 780-101 et seq. Second, if there is a second violation of the same provisions. Third if law enforcement officials seize any illegal drugs on the lease premises. 68 P.S. Section 250.505-A. It is this third provision that is problematic. A tenant may have their son or daughter who is at fault for drug possession, but yet the tenant and their whole family may be evicted.

Article V-B discusses in great detail a Tenants' Rights to Cable Television. This encompasses Sections 150.501-B through 250.510-B. I will not go into these in detail, as such provisions seem almost antiquated in the modern world.

So why did I write about this in such detail? Because I know a lot of tenants (and some landlords) and the law seems totally inadequate to address the needs of the various people. First of all, the law provides quick notices to try and remove tenants and distrain property to pay for rent. At first blush that seems to protect the landlord. However, chances are the tenant has no money if they are not paying rent so these quick procedures do nothing but put a tenant on the street. Second of all, a tenant has no right to pay less or to make payments in order to bring themselves into compliance with their lease. It is all or nothing. Also, the notices are easily mistaken or the service is easily missed, thereby lengthening the time for recovery or eviction. Finally, a tenant is often in a position of weakness with regard to a landlord, so they have no bargaining power to bargain for the right to cure or for more notice or any consideration whatsoever. It is generally take it or leave it.

Attorneys representing landlord tenant disputes must look to the lease itself for its language (nothing in the act changes or even discusses general contract provisions such as acceleration clauses as are common in installment contracts). Also, the time limits and the rules must be strictly observed. Finally, the exemptions must be carefully applied to protect both the tenants, but innocent third parties that may have an interest in personal property.